New Mexico legislators will have to pare down their spending plans because dropping oil prices have left the state with about $60 million less in new revenue than they anticipated.
State Finance and Administration Secretary Tom Clifford told a panel of lawmakers Wednesday the state will have just over $83 million in new revenue to use for spending increases on education and other government services in the next fiscal year.
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A December forecast had put that number at about $140 million.
"It is a lot less than what we were working with previously," said Rep. Larry Larranaga, R-Albuquerque, the chair of the House Appropriations and Finance Committee. He asked Clifford to return in the next couple of weeks with details of how Gov. Susana Martinez's spending priorities will reflect the smaller amount.
Rep. Dennis Roch, R-Logan, looked at the positive side, saying the state will have $83 million more to spend than last year.
The biggest reason for the state's smaller revenue increase is the decline in oil and gas prices, combining for a projected loss of $140 million in revenue in the fiscal year that begins in July.
"That gives you a good flavor of the volatility and the exposure that we have to the energy markets," Clifford said. Still, "some states are actually cutting budgets this year just to get through the current year. So, we're more fortunate than some."
A $1 change in oil prices causes a $7.5 million change in revenue for the state's main budget account, officials said.
State finance officials say the drop is mitigated by anticipated increases in revenue from taxes, including gross receipts, motor vehicle excise taxes, and personal and corporate income taxes, which are expected to bring in about $82 million more in revenue than estimated.
The more than $6 billion in spending plans proposed by Martinez and the Legislative Finance Committee were similar in calling for more spending on education and child welfare.
Martinez acknowledged the volatility of oil prices — echoing the warning of lawmakers — when she unveiled her budget last month but said other sources of revenue, such as corporate and gross receipt taxes, were trending upward.
Her $6.3 billion spending plan aims to grow New Mexico's economy and expanding education initiatives. More than $2.7 billion in general funds would be spent on education, amounting to a 2.5 percent increase over current spending levels.
The governor's priorities are not much different from lawmakers, whose budget recommendations targeted more than half of new revenues at education, with an additional $71 million for public schools and another $25 million for expanding early childhood initiatives.
The legislative budget proposal forms the foundation for lawmakers' spending decisions.